July: U.S.: Remove or retrofit old oil tankers in 2 years

Many of the cars haul N.D. crude oil across Minnesota.

By
David Shaffer
Star Tribune

September 30, 2014 — 3:06pm

George Frey, BloombergThe U.S. government on Wednesday proposed retrofitting or replacing railroad oil tankers that carry crude from the Bakken in North Dakota and Montana in two years. File photo of a Burlington Northern Santa Fe Corp. train hauling oil last month in Colorado.

Thousands of older railroad tank cars that carry North Dakota crude oil will be phased out or retrofitted in two years under a federal plan announced Wednesday to reduce the risk of oil train disasters.

"I would like to see this ­happen yesterday," said U.S. Transportation Secretary Anthony Foxx as he announced draft safety rules that he said would be rapidly finalized after a 60-day comment period.

The proposed rules are important for Minnesota because officials say seven North Dakota oil trains pass through the state daily. The state also has 21 ethanol plants that rely on truck and rail to deliver fuel because ethanol pipelines don't exist.

The draft rules also would extend an existing 40 mph speed limit for such hazard-laden trains, enhance train braking systems, direct railroads to review routing of hazardous materials through urban areas and set new standards for testing crude oil.

Foxx also said the Transportation Department has been testing light sweet crude oil from the Bakken formation for months and concluded that it is on the "high end of volatility" — a claim the North Dakota oil industry immediately disputed. Despite the harsh words about the oil testing, the overall reaction to the draft tank car rules from the oil and rail industries was more favorable.

Gov. Mark Dayton, who signed a 2014 Minnesota law to improve rail safety, on Wednesday urged the federal government to quickly act on the proposed rules. But Rep. Frank Hornstein, a Minneapolis state legislator who sponsored the state rail safety measure, questioned the two-year wait to retire or retrofit old tank cars.

Raymond Grumney

Graphic: Crude oil and ethanol train accidents

"If there is a jumbo jet that has a defective engine, we ground the plane immediately," Hornstein said in an interview. "We shouldn't take a couple of years to do this."

He also said the proposed rules don't adequately address a National Transportation Safety Board recommendation to reroute oil trains around major cities.

Foxx said skyrocketing U.S. oil production, mainly in North Dakota, has increased the number of oil-filled tank cars from 9,500 in 2008 to 415,000 last year. In announcing the draft rules, Foxx said at a Washington news conference that "the bottom line is … we need a new world order on how this stuff moves."

Since 2006, at least 15 trains carrying crude oil or ethanol have crashed in the United States or Canada, according to government data. In the worst accident in July 2013, a runaway, unattended oil train crashed and exploded in Lac-Mégantic, Quebec, killing 47 people. Six oil trains have derailed in the United States in the past year, including a BNSF Railway train that erupted in fiery explosions near Casselton, N.D., in December.

Federal data released Wednesday showed that only four of the 13 recent U.S. crude oil or ethanol train accidents happened at speeds above the new 40 mph limit. The average speed in the accidents was 32 mph, according to the data.

Born in North Dakota

North Dakota shippers created the modern crude-by-rail industry, taking a cue from ethanol producers who have relied on trains for years. North Dakota's oil output, which recently surpassed 1 million barrels per day, outstrips the capacity of pipelines. In May, 59 percent of the state's crude oil was shipped by rail.

The proposed federal rules will affect tens of thousands of tank cars used by the oil industry and the ethanol industry. The draft regulations target trains of 20 or more tank cars carrying hazardous fuels. Many such unit trains are 80 to 110 cars long.

In a separate step Wednesday, the Transportation Department announced plans to strengthen federal rules for emergency response to crude oil train disasters, and asked for public comments on the idea. The Minnesota Legislature this year passed a law to increase emergency response duties of railroads, hire additional rail inspectors and improve dangerous highway-rail crossings on oil train routes.

North Dakota Gov. Jack Dalrymple said the federal draft rules address areas of rail safety that need improvement, but "we need to further review the specifics of the proposed rules to determine if they are workable and offer the best opportunities for improved rail safety."

Crude oil volatility

After sampling crude oil at unannounced inspections in the Bakken since last August, the Transportation Department reported Wednesday that the region's crude oil has gas content, vapor pressure and other properties that indicate "increased ignitability and flammability." Even so, the report said, North Dakota oil has been classified accurately under current federal rules.

The investigation called Operation Classification sampled oil at many North Dakota crude-by-rail loading terminals, including one in New Town, N.D., owned by Dakota Plains Holdings. The Wayzata-based crude oil shipper loaded oil onto the train that crashed in the 2013 Quebec disaster. Dakota Plains officials did not return calls seeking comment Wednesday.

Kari Cutting, vice president of the North Dakota Petroleum Council, an industry trade group, said the DOT's test results actually show that Bakken oil is not more volatile.

"We are disappointed that the agency did not follow the science in coming to a conclusion," said Cutting, who also has worked as an analytical chemist. "The data show that Bakken crude is very similar to other light crudes."

Industry 'welcomes' standards

Cutting, whose trade group represents 540 companies in the North Dakota oil and gas industry, said the organization "welcomes the new standards" even though they will force shippers to review their tank car leases, storage capacity and access to crude oil pipelines.

The Association of American Railroads called the DOT proposal a "much-needed pathway" to improve safety, incorporating some voluntary industry measures. Since October 2011, all new crude oil tank cars have been built to more robust voluntary standards developed by the rail industry.

At Canadian Pacific, a major oil hauler whose U.S. headquarters are in Minneapolis, spokesman Ed Greenberg said, "It has been this railroad's position that stricter federal tank car safety standards are the single most important step to improving rail transport of dangerous goods."

But Fred Millar, a rail safety consultant who has long been active on train routing, said the draft rules too closely follow the wishes of industry. "They are not designing a significantly new tank car," he said.

The Transportation Department said upgrading tank cars and enhancing rail safety would cost $2.6 billion to $6 billion. One question is whether enough new or retrofitted cars will be available within two years when older models, known as legacy DOT-111s, would be phased out. Nearly 60,000 of those tank cars are used to haul crude oil and ethanol, according to the Railway Supply Institute, an industry group that includes the seven companies that build tank cars and own about 70 percent of them.

Manufacturers' annual output is about 46,000 tank cars, but that includes tankers for all uses, the group says. Only about 28,000 of a year's newly built tankers are destined for crude oil or ethanol service, according to institute estimates.

Thomas Simpson, the trade group's president, said he is reviewing the DOT proposal, which needs to be considered in parallel with Canada's plan to phase out older tank cars. "We are not rushing to judgment," he said.

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